Should I Serve as an Executor?

Transcript

Hello. I’m Jean Carter, an ACTEC Fellow from Raleigh, North Carolina. With me is Kim Stogner, an ACTEC Fellow and our North Carolina State Chair from Winston-Salem, North Carolina. Kim, thank you. Our topic today is serving as an executor. So, let’s jump in.

Kim, a friend of mine has asked me to serve as executor of her estate. She’s working on her will. She’s asked me to serve. What does that mean?

Kim Stogner: Thanks, Jean. The executor is the individual named in the decedent’s will that is going to be responsible for administering that person’s estate or settling the person’s estate in accordance with the terms of their will. Typically, an estate administration involves two broad categories: tax issues related to filing various tax returns for the decedent and their estate, and probate issues under the supervision of the probate court or the clerk of court to administer the estate in accordance with probate law.

Jean Carter:  So, if I agree to do this, to serve as executor, what will my responsibilities be?

Responsibilities of an Executor

Kim Stogner:  Just as I mentioned, in connection with the probate law, you will need to file the will with the clerk of court or the probate court. You’ll need to obtain “letters testamentary,” which authorize you as the executor to collect the decedent’s assets. You’ll need to make sure that you meet all of the filing deadlines for all of the probate documents, which would include an annual accounting each year that the estate is open that you will need to report all the receipts, everything that comes into the estate, and everything that you pay out of the decedent’s debts, taxes, and expenses.

And, it’s important that the accounting balances. So, you have to keep good records of everything you do as the executor of the estate. In addition to all the probate requirements, you’ll also need to make sure that you file the decedent’s final income tax return. The estate may also require filing a tax return as its own taxable entity. And you may need to file an estate tax return– a federal estate tax return for the decedent’s estate. So, you need to make sure that all those filing deadlines are complied with, as well.

Jean Carter:  That’s a lot of responsibility for stuff I wouldn’t really know how to do myself. Can I hire someone to help me?

Hiring a Lawyer or Accountant to Help with Estate Administration

Kim Stogner:  Absolutely. It is a lot of responsibility, and I would strongly encourage you to obtain good legal counsel. To hire a lawyer that helps with estate administration, in order to ensure that you’re filing all of the documentation that’s required by the probate court and by the taxing authorities at the appropriate times.

Jean Carter:  Well, if I hire somebody, do I pay them myself, or will the estate pay them?

Kim Stogner:  You do not have to pay anything out of pocket. The estate is responsible for paying any of the advisors that you need to hire in order to fulfill your duties as executor. You may also need to hire an accountant or an appraiser to value the property, and all of that will be paid from the estate.

Jean Carter:  Good. What happens in doing this job – since there’s a lot of responsibility- what happens if I make a mistake?

Liability of Executor of an Estate

Kim Stogner:  Well, hopefully, having a good lawyer to assist you will enable you to avoid making a mistake. But it is really important for you to know that you have potential personal liability if there’s a mistake that’s made that can’t be corrected. So, it is an important duty but also comes with liability, potentially.

Jean Carter:  So, I could be personally liable if something is done wrong?

Kim Stogner:  Yes. There is potential for that.

Jean Carter:  Do I get paid for serving as an executor?

Kim Stogner:  That’s a good question. If the will permits you to receive compensation and not just reimbursement for any out-of-pocket expenses that you would incur, then yes, you do receive commissions as executor. But it’s also important for you to know that any compensation that you receive is taxable income to you that you’ll have to report.

Jean Carter:  Interesting. Well, I’m going to ask you the big question. What do I tell my friend? Should I serve as her executor?

Kim Stogner: Serving as an executor is really a big job. It is not an honor. But your friend has requested this of you because, obviously, your friend trusts you with this responsibility. So, with this knowledge, I just encourage you to consider assisting your friend with getting good legal counsel to assist you in serving as executor of your friend’s estate.

Jean Carter:  Kim, this is great information. Thank you for talking with me.

Kim Stogner: Thanks, Jean.